GEN Restaurant Group Inc (GENK) Q3 2025 Earnings Call Highlights: Strategic Expansion and ...

This article first appeared on GuruFocus.

Release Date: November 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

GEN Restaurant Group Inc (NASDAQ:GENK) has engineered a dual restaurant concept that improves operating margins by using a single labor force for two restaurants. The company has reached an agreement with Cisco to sell its proprietary Gen Korean barbecue meat products to third parties, expanding its market reach. GEN Restaurant Group Inc (NASDAQ:GENK) is making progress on international expansion, with plans to open three new restaurants in South Korea in 2025 at a lower cost than U.S. stores. The company anticipates achieving a restaurant-level adjusted EBITDA margin between 17% and 18% and revenue between $245 and $250 million for the full year of 2025. GEN Restaurant Group Inc (NASDAQ:GENK) has grown from 33 to 49 restaurants since going public in 2023 without incurring any long-term debt, demonstrating strong financial management.

Negative Points

Cost of goods sold as a percentage of company restaurant sales increased due to inflationary pressures and a minor impact from the premium menu. Occupancy expenses and other operating expenses as a percentage of company restaurant sales increased due to new restaurant openings. The company reported a net loss before income taxes of $2.1 million in the first quarter of 2025, compared to a net income before income taxes of $3.8 million in the first quarter of 2024. Recent tariffs could materially impact equipment costs and construction materials sourced from China, potentially affecting new restaurant development costs. Same-store sales experienced a dip in March and continued to be negative in April and early May, attributed to macroeconomic factors.

Q & A Highlights

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Q: Can you discuss the same-store sales progression during the first quarter and any trends observed in the second quarter so far? A: January and February were strong months, but March saw a dip, ending slightly negative. This negative trend continued into April and early May. (Respondent: Unidentified_2)

Q: What do you attribute the recent weakness in sales to? A: The weakness is attributed to macroeconomic factors affecting customer sentiment. (Respondent: Unidentified_2)

Q: How do you plan to achieve the $300 million revenue run rate by the end of 2025? A: The growth to reach the $300 million revenue target is expected to come from new and existing restaurants, not from incubator projects. (Respondent: Unidentified_1)

Story Continues

Q: Can you explain the operational model of the dual restaurant concept with Khan sushi and how many such units you plan to open? A: The dual concept is designed to capture customers who might otherwise go to competitors. Khan sushi does not have grills, and technology is used to reduce labor costs. We plan to test more of these concepts to support locations where Gen might underperform. (Respondent: Unidentified_1)

Q: What gives you confidence in achieving the 17-18% EBITA margin target for 2025 despite a weak first quarter? A: Historically, the first quarter is the lowest, and we expect to improve margins through tight labor cost management as the year progresses. (Respondent: Unidentified_2)

Q: How are potential Chinese tariffs affecting your new restaurant build costs, and what is your strategy to mitigate these risks? A: There is uncertainty with price increases in equipment and construction materials from China. If costs do not stabilize, we may pause construction until prices settle. (Respondent: Unidentified_1)

Q: How are the six new restaurant openings from the first quarter performing? A: It's too early to tell, but performance is mixed with some average, some above, and some below expectations. (Respondent: Unidentified_1)

Q: Can you provide insights into the South Korean market and the expected performance of new units there? A: South Korea is a competitive market, but we will be the first to offer an all-you-can-eat beef model. Construction costs are significantly lower, and we are optimistic about the market's potential. (Respondent: Unidentified_1)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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